the size of the government spending as percent of g.d.p. goes starting say, two years ago, working forward 10 years? >> so our latest -- our latest baseline projections, government spending would be about 24% of g.d.p. in 2020 compared with an average in the past 40 years i think is closer to 20% or 21% of g.d.p., though much higher than we have experienced before in this country. . .

>> yes. exactly extended all tax income except those with higher income. the positive and negative

effects of extending all tax cuts. you question about the problem. i don't want to use the word, problem because it's a choice of chat the government should be relative to the thing that's different going forward is the high share of spending. as we've written to population aging, changing and health as spkts of the government's budget. >> that's an important point to keep in behind. dealing with reality as it's coming at us the government will go from 20% of g.d.p to 24 percent of g.d.p. that's in large part the driverer of the gap that's causing the deficit and debt that's going to bankrupt the country. this debate over taxes is really new jersey my opin

in my opinion a bit of a straw dog debate. as you pointed out, 75 to 80 percent of revenues will not be received because we're not going to pay taxes because everybody greece those taxes won't be raised so it really is this whole tax thing in my opinion is really not what we should be focusing. we should focus on the growth of this government from 20-24 percent and how to get that back into control under an imaginable number considering the revenue base. i think that summarizes my points, come together think of it and i thank you for your testimony. i want to thank you for graur professionism and you folks get a lot of pressure from people including myself and you always give the straight answers, that's the way it should be.

we appreciate it. >> thank you and from all of us here, we appreciate your support for many years for the work that we do. >> thank you and senator widen. >> and thank you. director, i share the view about the professionalism. we thank you. i want to take this tax discussion in the bit of a different direction. right now, there's a comparison underway between the tax policies and george w. bush and the proposals offered by president obama and i'm of the view that, that tax debate missed the point because both of those approaches, george w. bush and now what has been offered by president obama in my view involves tinkering with a badly flawed discredited tax system to me the much more relevant comparison. i want to walk you through the

numbers and just get your reaction. are the number use have when ronald reagan got together with a big group of democrats and reformed the tax system and compared those and what we saw in our country for job growth and economic growth, payroll growth to what we saw during the years of george w. bush. the 2001 and 202008 years. we get your reaction. here's the numbers. when ronald reagan and democrats work together, 16 million new jobs were created there was a 17 point 6 percent expansion in payroll. that's when democrats and republicans worked together to create a tax system that was more progrowth and more of an engine for job creation. by comparison from 2001-202008

when there was just partisan zip in the tax area. 3,000,000 jobs were created a 2.3 percent in expansion payrolls. now you have to look at the entire challenge for the american economy and tax policies are not the only thing. behind economic growth and job creation. but aren't those numbers relevant with respect to this question of job growth that you saw with tax reform, the democrats and republicans work together. you certainly saw more positive numbers, numbers that were progrowth. pro job creation than you saw in the years of 2001-202008? >> you mentioned there's a lot of forces effecting the economy in addition to tax million policy and it's difficult to isolate the problems there but

you raise an important point about the nature of the tax system. matters just as much if not more than the level of revenue collected. and we mention that a number of places in the written testimony that the experiments would have different results if the tax code were constructed different ways if the nature of the taxes overtime was different in particularly, for the in sensitive are marginal tax rates and there's ways to raise or lower revenue that involve changing marginal tax rates and ways that involve changing the base. amount of income subject to tax at the corporate or individual levels and those are important decisions for your colleagues. >> the fundamental model of 1996 which senator greg and i have picked up on. that model of radically

simplifying code. we have a one page 1040 form. 29 line as long broadening the base and lowering rates for both individuals and businesses, would you agree that model is more economically efficient than just going out and extending this vast array of loophole ridden tax breaks that cons institute the goal today? >> i can't speak to that. have not studied that too carefully, but i think there's widespread agreement that a tax system with a broader base and lower tax rates would be a much more efficient way to raise revenue and thus a better way to strengthen the economy while raising revenue. >> why would one think that the tax policies that produced anemic job growth and declining real income for the middle

class, those were the policies between 2001 and 202008. why would one think that reenergy acting them would create substantially more jobs and substantially more income in the pockets of middle class folks. i mean we have what occurred. now someone is talking about redoing it. people like senator greg and i are saying, no. why not go with a model that we know worked when democrats and republicans getting to and my question is, why would you reup for something that showed some anemic economic growth, job creation and payrolls between the 2001 and 202008 period? >> i'm not in a position to reoffer any policy. >> i'm talking just about the analysis. new "in focus" our analysis the only comparison is between short

run effects and long run effect. the principal effect of tax changes on the economy is likely through to the additional income that households would receiver but overtime in the medium and long run, the most important effective tax policy is likely to be not just the changes in total revenue but also the changes in incentives in our modeling reflecting that. the point you're making about the proposal you put forward are focused principally on the medium and longer runs of the tax policy and economic growth. >> let me ask you about the international economic challenge and the tax laws that relates again to job creation. when you talk to american businesses, they say they have to have this array of breaks for going overseas because the united states has a high comparatively tax rate to other countries with respect to the

business rate. so along came the various breaks and deferral and the others that the american people don't understand. what senator greg and i did is in effect go to american business and say, how much would you have to reduce these american rates in order to june okay lot of the stuff that you have oversee? so we came in with a rate of about 24 percent. significantly lowering the corporate rate. bits paid for. every single dime of sit paid for in our tax reform bill because we in effect take away the lower breaks to use it to strengthen american manufacturing. wouldn't that apart from our bill and in theory, wouldn't that particular change make it more attractive to grow businesses and generate job growth in the united states? >> yes, senator i think most

analysts would agree that broadening the corporate tax base and lowering the tax rate would be a more efficient way to raise that revenue. >> mr. chair, my time is up. i also ask mr. chairman to put in the records several studies that have been very supportive of the bipartisan tax bill particularly that done by the manufacturing alliance. brookings association and the heritage foundation. they would be just short summarys if we can put that in. >> without objection and i want to commend you and senator greg for coming up with, really, a very thoughtful tax reform proposal. i mean to say quickly if i could, senator energysen. it's clear we'll have to cut spending as a share of the economy. also clear to me, we cannot afford to make permanent all the of the tax cuts that are currently in the code that kind

of jumps out at you. that what we need is tax reform. the tax codes now, 8500 pages long and it was never designed with competitiveness in behind. the world has changed. since the tax code was written. and if we don't write a new tax code that relates to the reality we confront today that we're in a fully competitive global environment and write a tax code with that in behind, i think we're making profound mistake. just to double down on this current tax code is just a huge mistake. senator, thank you for your court see. >> thank you very much mr. chairman i want to association with the remarks the senator just talked about. there's no question some of the economic effects of the tax code

are just complying with the tax skoed. it's a huge burden on individual as well as business in complying with the tax code. look at the estate tax, death tax. whatever you want to talk about. the complexities of trying the avoid taxes. the huge cost, you know businesses make investments based sometimes on the tax code instead of what's necessaryly makes good economic sense and so there's no question. i believe very strongly that the best thing we could do is what you just talked about. mr., that's broadening the base and lowering the tax rates is absolutely the best way to go. i want to pick up on something you said a little a while ago. you said that - if we lower tax rates and in one of your charts

over the next couple of years, it will increase g.d.p. is the opposite true if we raise taxes over the next couple of years if we let the tax rates that are on the books currently expire, will g.d.p go down? >> well, our economic baseline as you know has to be conditioned on current law. so our economic forecast assumed those tax cuts expire, and relative to that, an extension that we've done ourest mates and extension of the tax cuts would inl fact boost g.d.p and employment and starting from that point than had the tax cuts expired would lower g.d.p. that's in our economic forecast. >> but it does make sense so raising taxes will decrease the g.d.p if those go up there's no question the g.d.p will go down verses keeping those tax rate is where they are today.

>> yes, over the next few years. over the short-term effects. >> i think that's important and some of the analysis you've done as far as long-term is very important. and like you said. it's not just the tax cuts. the spending. both of those things, i agree with you. i think if we're going to do the tax cuts we should look at ways to cut spending it isn't a short-term economy we need to think about here. we need to be responsible for the long-term and while ideally doing what the senator is talking about to me that would be the best way to do it and if we could low tear rates low enough, and do that, paying for it through lowering spending, in the long run we'll be better off as an economy and country and obviously, those are tough choices to make along the way but the responsible thing to me because the biggest threat to

long-term economic output is the debt. is it not? >> yes, u think that's right senator. the challenge on the spending side is that the revenue loss from extending the tax cuts is a very large number as we've reported based on estimates between the committee. the full extension would reduce it by nearly four trillion dollars over the next 10-years. >> what percentage of revenues is that over 10-years? >> that, i don't know offhand. i think we do report in our - so i guess rereport in this testimony that a full extension would reduce a tax revenue by about 2% ofgnp in 20/20 in a base 20% or so. by a 10% reduction in revenue. by the 10% reduction in revenues. >> over that period of time. have you all looked at what states and cities are doing as far as cutting butt?

>> well, we've followed a little bit. >> do we think there's 10% waste in the federal government? >> the problem is one person's view differs from another persons view. >> let's take it this way. every family, every business, local and state governments across america right now are cutting their budgets and they're basically wringing out the waste. you talk to every business in america and that's what they've done over the last two years and they were, this is a private sector and they had a lot of fat. the private sector did. local governments, state governments and they're wringing that out. the one place we not cut the fat is at the federal level if we can say we don't think there's 10% in the federal government that is completely would - it's

a draws statement to think we don't have at least 10% in this government. in efficiency in this government. all i'm saying is that 4 trillion is a big number, sounds big except that when you look at it as 10% and we don't think we can take 10% and get this government more efficient by that. by cutting out inefficient programs and eliminating dupe mriication and waste, i think if this congress can't find pen 10% waste this congress should throw us all out and that's why i think the number is important. >> senator. it's up to you and our colleagues. not our place to say which parts of government should be smaller or largeer in what ways but i want to emphasize the problem here. the less set of bars shows revenues and spending under current law and the right shows with the tax cuts expenseed the

full extension through 2020 we've been talking about. the red box is the size of the deficit. that amount is larger than all of the spending on social security in 2020. i think a little smaller than all of the federal spending. it's much larger than all spending on deal. much larger as you can see on the box next to it. all spending a part from the handful of the largest programs. >> and a big part of the reason for those deficits is because, in that year, that 1.4 trillion deficit, at that point, how much of that is interest on the debt? >> interest is large. over 900 billion, isn't that correct? that's because we're together it every year right now at such huge numbers and what senator greg talked about spending being the largest part of the problem. that's why at the federal level

we need to get it under control and weert an a critical point. this is unsustainable the numbers here is unsustainable. this country is going to become greased but we don't have the union to bail us out if we have these debt numbers in the future it is unsustainable and that's why this congress needs to heed the warning that we have to get our spending habits under control. it's critical for the future of this country. >> thank you, mr. chairman. >> senator? >> thank you mr. chairman. thank you director for your comments. i guess, i concur with my colleague from nevada on streamlining as someone that did some of that. i think also the notion and the testimony reflects this that the problem is such magnitude if we're only going to do it on one side of the balance sheet, this is challenge that will require

us to recognize sufficient revenues to meet core functions of the government and cutting revenue side constantly saying we're going to simply find all of the spending through waste and fraud. tire some action that's never proven to be the case. those that say we can tax on the top end continue together spend at this rate. i think it'll take both sides and i can't or can only hope that i would prefer frankly the statutory approach that the ranking member had on fiscal commission. unfortunately, many of our colleagues on the other side of the aisle wouldn't join towns statutory approach that would have forced our feet to the fire. i'm hopeful the presidential convention and all members will kind of keep their powder try and let the presidential commission work it's way tliend hope it comes up with very bold and challenging courses that frankly, challenges the

orthodoxes of both political parties to make hard choices because the notion of the spending side of the revenue side i think is false. let me turn my questions to the - back to the first chart, sir. where you looked at things that could have an effect on unemployments in the next couple of years. we seem to be having kind of a by theiry discussion here. either extend. a lot of debate about the value of the top end 2%. 700 billion dollars over 10-years in terms of lost revenue. approximately since it's an accelerating number more in the 70 million over the two-year

period. guess the question i would have and i don't know if your office has done this analysis. is if we say that taking that money out of the economy on the short-term basis may have some negative effects. and then the only choice becomes. let's just leave it with the top income earners. some of which may spend but many of whom will evidence showed perhaps simply save those dollars and deposit them that will not have the short-term effect we might need to get employment restarted and the recovery continued. i guess you've looked at payroll tax and full and impartial expensing of investment costs. i guess, what i am asking is if we said, what we could can do with a two-year period. 70 billion of targeted

short-term tax cuts that might have most bank for the buck are those the two that you have analyzed and are there others. the question being my premise being. i want your response about taking so long. i would argue at the macro level we in government have used most of our but let's and monetary policy and lowered interest rates to historic lows and perhaps while not as efficiently as many would have liked we've used stimulus, but the one good piece of news that doesn't get as much attention is during the recession. particularly large scale things have retooled and frankly, they're balance sheets are healthier than ever. american corporate one thousand companies are healthier than they were pre recession. north of 2 trillion dollars sitting in cash on those balance sheets. we can argue policy uncertainty

and that's one of the issues, but if you - i'm asking you to speculate here if you had 70 billion of short-term targeted tax cuts that would expire, in two-years to try to get to that 2 trillion off the corporate balance sheets into the economy reinvested as economic engine that would jump start it would you choose either employer payroll tax reduction, the immediate example sensing or other tax reduction tools on a short-term basis to get that 2 trillion reactivateed the economy. >> there may be other policies. we cast a wide net in january. i'm sure we didn't catch everything. among policies that we studied as chart shows. reducing payroll taxes or allowing full or partial expensing of cost would have much more bank for the buck or

positive income on the economy per dollar of budget costs than would a broad extension of the taxes. >> you're a assumption is that those would be whether it is the payroll taxs or the immediate deduction those would be short-term targeted and we studied simply temporary year, two-year. what have you. did you look at there's a host of other things. r&d tax credit outstanding there's out there. did you go through the whole analysis the business community a laid fourth. >> not looked as carefully at the research exspear men tax tax credit. it's clear many businesses probably expect it to be extended that probably means that if it were extend now and uncertainty would be resolved that would have little positive effect and if your colleges were going to enact it any way it's not as incremental.

>> of course, the presidents proposing racing to 17. many countries are at 20. we looked at that. small increase in the rate would material another little bit. probably wouldn't - i want to lay on that but i guess what i would ask - but i guess what i would love to see your office do analysis is recognizing that if you had to take the dollar of one year or two-year of that top 2% and couldn't could those funds be better put to use? recognizing taking those out of the economy right now. might not make that much sense but where are we getting best bank for the buck? payroll taxes or immediate expenseing? >> would be significantly more bank for the buck than extending all of the tax cuts and then in the bottom bar extending all the tax cuts and extending the higher tax [set actually the

less effective piece because those people would be likely to spend a smaller share than people receiving the bull to have beening rest of the tax cut. >> my time is about expired but i would love to have your office scrub those a little more, and if you could give us with more specificity, bank for the dollar vested in terms of targeted tax cuts and i would ask as well for you to look at other menus of suggestions that the business community has laid out. my point is, we have two trillion dollars and that's the last bullet we have not used getting resources back invested in our economy. thank you. >> thank you. >> thank you. mr. chairman, doctor, thank you for coming. my question is, one of kind of comparisons.

over the last two to three years. we've stimulated our spending or spent our printed about four and a trillion dollars if you count what the federal reserve has put in and taken out and put in and taken out over the past two to three years. besides the money that the congress has allocated either through tarp or through the stimulus program. so - it's about 4 trillion dollars give or take. the unemployment rate, as of january 2009, was 7 point 7 percent. in august of this year, the unemployment rate was 9 point 6 percent. it's been in access of 9% for

over 16 consecutive months. with the stimulus that we used, can you estimate - or have you the ability to estimate. i'm not sure you do, when we're going to see 7 point 7 percent or pre recession, 5% unemployment rate? can you give me an idea? >> um... well so we do make projections and you understand the uncertainty? >> i understand the uncertainty. i've been here for 12 years. and have looked at all the projections. >> so our current projection that we published in august is under current law the unemployment rate would fall back to 7 point 7 percent you have in behind.

i think in 202 at some point. >> 2012. >> are you telling me that the 15 million part time are totally unemployed people will be back to work? well, there's a lot of churning in labor force. many people without work today will find jobs and others will lose jobs so on balance we think the unemployment rate as we say in the testimony will remain above 8% until 2012 and remain above six until 2014. there is a significant in growing literature on the effects of the longer term effects of financial crisis. and in addition to the severe recession that offers immediately. will it ra sure shows economic

growth welcome b can be weak. we project it going dabb back d to 5%. there's other reasons that may not happen for quite a long time because of tremendous dislocations in the financial system in the economy. and longer term effects of that. >> years of personal family unemployed - i have a grandson that's unemployed, he's been unemployed for eight months and his job is never going to come back. delta airlines used to have 400 flights out of the greater cincinnati airport. they're at one third the number of flights now, not to ever return to the 400 plus that they had at one time so. his job is never going to come back. he's going to have to be

re-educated into other types of position. tell me this. and i have seen all your wonderful charts on the employment - the tax, the changes or the nonchanges in the tax code. the exploration of the tax at the end of this year. have we ever been successful in raising taxes to help our economy in a recession? >> not that i'm aware of, senator. raising taxes in a recession will tend to flow economic growth and that's as we explained the report, part of why we have such a slow growth rate projected under current law. >> how do you get out from

understanding that? >> in 2 short run, on tax cuts or government spending increases, provide a boost. the challenge you understand is what happens beyond that and over the medium term and long-term unless those actions are undone, offset in some way by other actions there's a medium term and long-term drag on the economy. >> we talked about debt and other things and we didn't talk about interagency debt. right now, to pay our social security benefits. the federal government has borrowed right at a trillion dollars from the social security trust fund. right at. we have written ious kept in parkersberg and west virginia and there's nothing to back it except the iou. which means that federal

government has to make good on those ious. and they don't have anything to do with, except to print the money. or raise taxes or raise - yeah. any way you can pay-off that trillion dollars. so my question, this is a little off the wall and it's the last question i'll do. according to the social security and medicare board of trustees. social security is projected to permanently face them in 2010. permanently and medicare will become in solvent in 2029. however if this was not bad enough. the report indicates that social security will operate with a cash flow deficit this very year. shouldn't we be concerned about the impact this paired with the

large budget deficits that this administration has projected will have on my 40 grandchildren? and future generation? >> senator, yes, i think the concern effects of amounting debt will be felt particularly by future generations. >> isn't that just kind of a transferring of what we can pay for and what we or what our accesses are presently to my children and grandchildren? isn't that kind of a wealth transfer or a debt transfer? >> yes, i think that the issue about how large the federal debt is importantly a distributionle issue across generations. >> thank you very much for your answers. >> thank you, senator.

>> doctor, would you explain the phenomenon of the fact that the u.s. government is borrowing more and more money all be it, the federal reserve is trying hold down the rates. and why those rates projected well into the future interest rates are staying so low? >> so i think the most of the analysts believe that interest rates are low because although the federal government is borrowing a tremendous unprecedented amount, private borrowers are borrowing much less than they generally borrow and interest rates will reflect the overall balance between the demand and supply of credit. so the one can think about those

decline in private borrowing as reflecting and reinforcing the slow of private spending. the federal government has stepped in partly through automatic stabilizers and partly through deliberate actions boosting spending and borrowing as part of that. it's the balance of the forces with the supply of funds. some from overseas and some from domestic savings at the level of interest race and in our forecast. interest rates rise a good deal over the coming decade as economy recovers and private credit demands go up. meanwhile. federal borrowing would be very high and the combination of that demand we think will push up a good deal over the course of a decade together with a high level of federal debt that leads interest payments being unprecedentedly large. relative to g.d.p by the end of the decade.

>> do your projections square with the projections of the federal reserve? >> i mean federal reserve does not release projections that go out the entire decade. they do, the f o mc releases it's projections for a period of years. our forecasts are generally fairly close to theirs. in general, they are i don't think our views about the state of the economy is i'd owe sin chattic in any way to us. >> the mark et would give us some idea of what the mark et thinks about interest rates and how do you square the fact that tenured treasury bills are sold at such low rates?

>> i think apart of that is financial markets seem to believe you and your colleges will put fiscal policy on to a sustainable path and, when fiscal crises erupts and we issued a brief about this few months ago. it comes from a loss of that confidence. when investors feel that some government of some country isn't acting in a way to put fiscal policy in that country on a sustainable path. very difficult to predict circumstances that can lead to the loss of confidence. i think at the moment, investors believe that u.s. fiscal policy will be put on a sustainable

path. how that confidence will evolve in response to actions taken or not taken bayou and your colleague's, i do not know. >> i'd like for you to comment, if you will on the wisdom of a tax policy given the fact that in your testimony, you said that the national debt is going to amount to 70 percent of g.d.p for the next 10-years? and in looking to find sources of revenue, the loopholes that we find in the system now allow multi national companies and an example that's fresh in our behinds is bp. to receive tax credits, for tax credits that were intended not for oil companies, but for

manufacturing companies. do you think that from a policy standpoint, i won't ask you the political question that - the closing tax loopholes should be a priority in the debt reduction effort? >> i think it's that kind of policy choice has to be yours and your colleagues, senator, but i think - and you know specific tax provisions can have positive or negative effects on economic outcomes depending on the provision. i don't want to just speak too againerically about them. i did say and would repeat a wide consensus of analysts would agree that a tax code with broader base effort of income at the corporate or individual level to be taxed and lower rates would be more efficient

than a tax code with narrow base and higher rates. but the specific provisions that one would change to move from one to the other, we have to look at on an individual basis. >> before i go on to the next question, i'll just opine that another example of a loophole is that the taxpayers are actually giving tax money to oil companies, to encourage them to drill in deep water. something that the oil companies vigorously want to do because of the oil reserves and yet, royalty relief, that is those payments that would normally be paid to the u.s. government when u.s. federal lands are utilized

that those royalty payments were forgiven. - to oil companies. over a technicality. and i don't think that a lot of people in america realize that tax dollars, their tax dollars are actually being used to pay ail companies to drill in deep a water. i want to ask you about exports and i want to ask you about the potential for u.s. exports to partially fill this void of the deficit. give us your ideas about the impact of increased exports as a means of reduction and a reduction of our trade deficit.

which will help the overall fiscal outlook? >> so i think that - that if our exports could be increased, that would certainly that extra demand for u.s. goods could lead to more production and more employment by u.s. firm. that kind of strength in the economy would be good for the federal budget. if the challenge is to see what forces in the world or what policies you might enact would boost exports is a little harder. as you know, much of the rest of the world took part to import our goods that present our exports are also suffering from weakness in their economies and if they had stronger economies, that would help us too but we don't control that and of course they're trying strengthen their own economies. i think the actions the firms have take then the last few

years to raise productivity in this country have been in the short-term, bad for employment but overtime, can make us more competitive in a way that could be good for example sports and employment in other ways. but there aren't - i they lot of policy relieverers that would have a substantial effect on any short-term period. our projections are really looking at the world and the weakness in other economies implies that only slow growth and demand for our products. >> in certain states, mine included, the economy is so down in the dumps because of the housing market. i was curious when talking to one of the senators from wyoming that they have less or they are

hovering around a six percent unemployment rate. compare that to other states. mine included which has wean in the range of 12 percent. maybe down in the 11 percent range. now 11 and a half. for the record, i want you to tell us how are we going to write or right our deficit situation without stabilizing the housing maket? >> this map from our testimony shows unemployment rates across the state as of august and one can see some of the states with the highest unemployment are those with the largest housing booms and then the largest housing busts the following state is one of them. senator. the persistent weakness in the housing market is on-going drag on the economy.

the number of houses started so far this year per month basis is a little above last years extremely low level. but still much lower than would be required, on a regular basis to house our growing population. and the proximate cause of that is a lot of unoccupied houses today. and that stems both from the over building that happened earlier but also from the weakness of the economy. people who don't have jobs or who are afraid of losing jobs - or working part time jobs much less are likely to form their own households and seek their own places to live than they would be if they had a full-time job for some period of time and i think that there's reinforcing pattern of weak economies and reinforcing in strong economies. the weak economy is limiting the

demand for housing. not people in their hearts but the demands they can actually display in the market. they're not looking for new homes and that weakness in the housing mark set reduceing the number of people employed to build new houses and keeping up house prices and making people feel poorer and those things reenforcing the weakness employment and spending. there are policies that have been discussd to try and strengthen the housing market. one particular policy that's been fwaeth lot of discussion the last few months that we've looked into is ways to change what fannie mae and freddie mac do in terms of allowing people to refinance their mortgages. significant shares owe more than the homes are worth. lot of others have positive equity but not very much. that prevents them from

refinanceing in the way they might otherwise refinance given how far mortgage rates have fallen. number of those floated by analysts and advocates to relax the rule that fanny and freddie mac impose on being able to refinance your mortgage. looking at this now, our two work is at a preliminary stage but that fits the outside people, that one could improve the cash flow of home own ers by tens of millions a year through relaxation of the refinancing. letting people take advantage in the decline in rates. that they can't now because of the decline in-house prices and there might beacon sequences of that from the federal budget. i don't want to suggest it's a free lunch but there's reasons to think it's a piece of stimulus working through the housing sector. >> and in correlation to that. i just recently had a major car

dealer get in touch with me and it's typical of what's helping in the housing market as well. only in this case, it's small business. the bank has revalued the properties upon which the car dealer has the mortgages. and the bank is unyielding. they're saying since the value of your property, real estate in this case the dealership. has come down and your mortgage is here, you've got to by off. well of course in this economy car dealers aren't doing particularly well. all though it's getting better so they don't have a lot of cash hanging around. and here, they're looking at the possibility of for closure on a major good business that has

never missed the mortgage payment and but for the uniqueness of this in a state like up there. those dark colored states, where the property values have dropped out of the bottom. but for that uniqueness, this would be a continuing taxpayer who is paying bills and paying mortgages. your comment? >> um... so i think you're just right to note that there are a lot of small businesses that are facing trouble obtaining the credit they need. senator mentioned that large businesses are mostly quite healthy financially sitting ons assets and not spending. it's much different for small businesses if someone looks at the lay-off's and hiring across the patterns of large and small businesses. large businesses have resumed

hiring in the way small businesses have not. so the lack of credit, but also very importantly just uncertainty about the state of the economy and i think that has to be put first on the list of uncertainties about the state of the economy and the difficulty in getting credit has really restrained the hiring of the small businesses that are they doing. they have not come back looking for workers the way large businesses have. but i don't have a magic want or wand for the uncertainty and weak demand. >> could you comment on the fact that we have just passed and sent to the president, a major small business lending bill? it had a series of tax credits for small business, but it sets up a 30 billion dollar lending facility and under the terms of the legislation, that has to go

through healthy community banks to then be lent in it's defined in the legislation to small businesses. do you have any progress nosetyication of how that may effect the future? >> i don't think i really do. our costest mates for the legislation said that we think the money will be taken up so that the banks will come to the federal government or the healthy bank you know will come for this capital up to the limit in the legislation. so if - in that sense we think the program will encourage banks to do business with the government and then to do business with small borrowers, but we have not looked at the overall economic effect office that. in particular, the extent to which their finding ways to take credit it to lend together small businesses verses the ways they actually supply more credit than

they otherwise would have is not so clear. we haven't looked at that policy that carefully. >> so it must not have been c.b.o. that made the estimate that the 30 billion dollar lending facil facility would pr accuse this debt of lending business. >> that comes from capital requirements that bank have. that 30 billion can support 300 million of loans. the question i had is that incremental to what would have happened otherwise or not and that's the challenge mr. government programs are trying distinguish between things that are newly induced by the legislation, verses things that might have gone on any way that sort of allowed to count and we have not looked to my knowledge, at that part carefully, but we do think the money will go out and support small business loans

if the incremental effect on the economy that we have not studied. >> does any of the staff have any questions? >> okay. doctor, we're starting a series of votes right now. the chairman has asked me adjourn the hearing. we want you to know how much we appreciate your public service. and thank you for this testimony this morning. >> thank you very much. >> meeting is adjourned. [captions copyright national cable satellite corp. 2010]

>> theoretical physicist and author. this is his latest. physiques of the impossible. join our three hour conversations with your calls, e-mails and tweets live on ins on c-span two book t.v. this

weekend and through december. listen to landmark supreme court cases on c-span radio. >> i believe the record indicates at no time during the interrogation and prior to his concession was he advised of his rights to remain silent. his right to counsel or consulting with counsel. >> miranda verses arizona this saturday on c-span radio in washington d.c. at 90 point 1 fm. and on-line at c-span radio dot org. .